Hindsight Bias

The hindsight bias is the tendency for people to believe they knew what the outcome would be after the event happens, simply because the outcome is so obvious after-the-fact. The trap here is that it likely was not so obvious before-the-fact. But people may convince themselves that it was, and they knew it all along. The danger is that hindsight bias can feed randomness error…and that is a monster that does not need to be fed.

An example of hindsight bias: the pundits who predicted the 2008 credit crash, an event that snuck up on most people. While there were certainly some people who screamed about the possibility from the rooftops, and were called fools for doing so, it’s not nearly as many as those who claim that they knew, even though they did not, and never offered any insight that a crisis might be lurking around the corner.

Or they made vague claims about some future crisis, then after it happened, they yelled “Ha! I told you! I knew it all along!” Yeah, right. It’s like dialing one of those 1-800-number psychic hotlines.

Point to remember: “Hindsight is 20/20,” as the old saying goes. But foresight is not.

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